We Are All Lab Rats In The Largest-Ever Monetary Experiment In Human History

There are ample warning signs that another serious financial crisis is on the way.

These warning signs are being soundly ignored by the majority, though. Perhaps understandably so.

After 10 years of near-constant central bank interventions to prop up markets and make stocks, bonds and real estate rise in price — while also simultaneously hammering commodities to mask the inflationary impact of their money printing from the masses — it’s difficult to imagine that “they” will allow markets to ever fall again.

This is known as the “central bank put”: whenever the markets begin to teeter, the central banks will step in to prop/nudge/cajole the markets back towards the “correct” direction, which is always: Up!

It’s easy in retrospect to see how the central banks have become caught in this trap of their own making, where they’re now responsible for supporting all the markets all the time.

But instead of admitting that Great Financial Crisis was the logical result of flawed policies implemented after the 2000 Dot-Com crash (which, in turn, was the result of flawed policies pursued in the 1990’s), the central banks decided after 2008 to double down on their bets — implementing even worse policies.

The Largest-Ever Monetary Experiment In Human History

It’s not hyperbole to say that the monetary experiment conducted over the past ten years by the world’s leading central banks (and its resulting social and political ramifications) is the largest-ever in human history:

This global flood of freshly-printed ‘thin air’ money has no parallel in the historical records. All around the world, each of us is part of a grand experiment being conducted without the benefits of either prior experience or controls. Its outcome will be binary: either super-great or spectacularly awful.

If the former, then no worries. We’ll just continue to borrow and spend in ever-greater amounts — forever. Perpetual prosperity for everyone!

But if things hit a breaking point, then you had better be prepared for some truly bad times.

Excessive money printing leads to the destruction of currency. Fiat money (like the US dollar, the Euro, the Yen, and every other world currency) is a social contract and has an associated set of related agreements. When that contract and those agreements are broken by reckless expansion of the currency base, things fall apart fast. We need look no further than current-day Venezuela to understand that.

It’s important to remember that money — whether physical cash or in digital form, stocks, or bonds — is just a claim on real wealth. Real wealth is land, clothes, food, oil…you know, real things.

We expect that our cash will be able to buy us the real things we want when we want them. We trust that our stocks give us an ownership stake in a real company producing real things for real profits. We rely on our bonds being re-paid in the future along with interest; but if not, we expect that our bond becomes a claim on valuable collateral.

Ideally, the money supply and the amount of real wealth should exist in balance. As money is a claim on “stuff”, as economic output (i.e. “stuff”) increases, then so should the claims. And vice-versa during periods of economic contraction.

But what happens when the claims start to far outweigh the real “stuff”? That’s when things get precarious.

Note how dramatically the claims represented by just the S&P 500 index alone have quadrupled since the start of 2009, driven by the central banks’ quantitative easing programs:

The flood of money unleashed by QE didn’t result in vast amounts of new actual wealth being created (i.e. greater productive output per capita). But it did result in grotesquely-inflated financial asset prices that have helped to create the most profound wealth and income inequality seen in our lifetime (perhaps ever).

The Many Sins Of The Central Banks

The list of central bank-induced injustices is long. It reads like the rap sheet of a virulent psychopath: $trillions looted from savers and handed to the big banks and leveraged speculators, ruined pensions, shattered retirement dreams for millions, record amounts of debt in every corner of the global economy, and an increasingly unaffordable cost of living for everyone but the elite 1%.

“But we had to save the system!” cry the central bankers in their defense.

Even if that were the case (and I dispute whether the world is really better off for having saved Citibank et al.), that rescue should have ended back in mid-2009, at the latest.

But instead, the central banks ramped up their wanton ways in the years since the GFC. Did you know that their largest-ever printing spree happened over the past two years? (2016 to 2017):

The bigger the printing spree the bigger the fundamental distortions. In such a world, up becomes down, black becomes white, and right becomes wrong.

All of which means that fundamental analysis, has been all but useless as a predictor of prices. All that has mattered is the answer to the question: “How much will the central banks print next?”

In such an environment, there’s no room for investors. It forces all of us to become speculators, trying to predict what a small cabal of bankers are thinking.

But among their very worst offenses has been the manipulation of sentiment. The prices of financial assets and commodities have become political and propaganda tools, which means that nothing can be left to chance. All prices have to send the “right” signals at all times, in the same way that certain news outlets pump a point of view endlessly. Repetition creates its own reality.

Because of the increasingly frequent (probably daily), interventions by central banks and their proxies, the financial markets have become ““markets””. They no longer provide us with any useful signals about the future or about the current health of the economy.

Instead, they only tell us what the authorities want us to hear.

To them, all that matters is strength and stability. As long as those conditions contine to be met for stocks, bonds and real estate prices, most people are content to let things ride and not probe too deeply.

But when this scam comes to its inevitable end, the crash will be spectacular when it arrives.

This reckoning is already way overdue. At this point, we find ourselves in the odd position of rooting for it to happen soon, as the potential energy in the system builds with every passing day. Our worry is that if the crash is delayed for much longer, its resulting carnage will be so large that it will be unsurvivable.

And while we mean that in the figurative sense for people’s portfolios, it’s possible that the crash could become literally unsurvivable if the political “solution” to deflect blame away from the the central banks and their DC partners-in-crime is a kinetic war.

When viewed in that light, America’s histrionic attempts to demonize Russia over the past few years begin to make frighteningly more sense.

It’s Time To Talk Turkey

We’ve been vocal of late about the numerous signs that another great financial crisis is building. The gut-punch Turkey hit global markets with this week is just one example.

Yes, it will be painful to crash from here. But once the needed correction is underway, we’ll have the opportunity to make the best of it.

We can pick up the pieces and begin building towards a future we can all believe in.

Yes, there’s no avoiding the pain of taking our lumps for the the past mistakes we’ve made. But we don’t have to compound our misery by continuing to do more of exactly what got us into this mess in the first place. We simply need the courage to face the psychological burden of admitting to our prior failings.

That’s doable.

It all starts with being honest with ourselves.

Look, we all know the world is finite. Infinite economic growth on a finite planet is an impossibility. We have all the data we need to make that conclusion. Every passing day where we pretend that’s somehow untrue or avoidable makes the eventual adjustment that much more wrenching.

It’s an intellectually simple exercise to conduct. But an emotionally impossible task for those whose internal belief systems would be hopelessly compromised by allowing that logic to penetrate their world view.

And so the future will be represented by two sorts of people: those able to face what’s coming head on and prepare accordingly, and those who can’t.

I sincerely hope that you’re not among those deterred from preparing by the last gleaming of today’s glittering stock prices. We’re going to need as many prepared people as possible in the coming future.

And we may need them soon. The severe recent deterioration in the Emerging Markets threatens a contagion that could well start the next crisis.

Turkey is currently in a major currency crisis threatening to metastisize into a full-blown sovereign debt crisis. Defaults there will spill over into Europe’s banking system (which has made loads of shaky loans to Turkey), and from there cause domino effects throughout the rest of the world.

But Turkey isn’t the weakest or the most worrying country faltering: Italy is stumbling, as is Brazil, and even China. But Asia ex-China is the real powderkeg. Their unserviceable debts dwarf everybody else.

In Part 2: The Emerging Market Threat, we detail out the specific concerns to watch for in the fast-unfolding Emerging Markets drama. Which countries pose the greatest threat? And how bad could things get if the contagion indeed spreads?

For years we have predicted that the next crisis will progress “from the outside in” as the weaker players succumb first. That appears to be what we are seeing now, and it’s causing me to advance my own personal preparations.

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This is a quote, “Paper and digital money is in reality a type of mortgage on wealth that doesn’t actually exist, backed up by guns TPTB aimed directly at those who are expected to produce it. Paper/digital money is merely a open check drawn by legal looters (gov’t) upon an account that is not theirs, upon the virtue of the victims. Watch for the day when the check finally bounces, marked Account overdrawn.”
The fed. res. and those in collusion have created a debt-based system, that is, all new money is loaned into existence. It is created from a few key strokes, sending electrons to the computers of the Treasury, and various banking systems and investment houses.. It does not have physical properties, it exists only because TPTB say it does. It does not actually exist in the money supply. It is created by an entity (fed. res.), then loaned to the gov’t with interest – this “money” is created from nothing. It is fiat currency, it has absolutely no intrinsic value, it is fungible only by official decree.
In addition to money and currency, the TPTB would love to have complete ownership and/or control over ALL gold, oil, drugs, guns, natural resources, high technology, secrets, all levers of power, and of course the citizens who are viewed as nothing more than managed disposable resources for the state.
There is now a joint gov’t/corporate effort underway to completely eliminate physical cash, all money/currency must be digital. There will be no privacy how you spend or invest it. You will be forced to use institutions to use your own “money” (who by the way will still force you to pay all banking fees). A digital record is made how every cent is used. It can be confiscated at will, and in reality you can use your own money only because they allow it. Your money is your property, but when you cannot physically possess it, you are stripped of your personal power. Officialdom has decreed the banks, if necessary, have de facto ownership of your money.
The more controls TPTB place on money the more likely the entire federal controlled system is to stay corrupt, fraudulent, and inefficient; the public is continuously and intentionally deceived. Gov’t (the taxpayers) will continue to socialize huge losses, banks and investment houses have a sugar daddy, but profits will stay private. Nothing will change with the new paradigm, the public’s trust will continue to be betrayed, the public always loses. For example, a bailout to a bank can be billions of dollars. The stockholders, who are mostly very wealthy, have taxpayer money transferred to their pockets
Meanwhile, the gov’t year over year lies about the real inflation rate; we know it, see it, and feel it. The truth is, only gov’t can cause inflation, and only they can stop it. It is really a highly progressive tax, but they don’t want to end it because gov’t benefits from it several ways. Americans are losing more than a trillion dollars in banked wealth every year to inflation. Suffice it to say for now it all adds up to destroy the middle class. I recommend doing business through a credit union. If you must use a bank keep only the absolute minimum necessary for transactions. Take the rest out in cash to use and save discreetly.
Big business and gov’t have colluded to jointly subjugate the citizens. Gov’t gets more power and resources, and big business (including banks) gets more wealth and special privileges. The banks, gov’t, and TPTB are highly integrated. Proudhon said “To be governed is to be at every transaction noted, registered, enrolled, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, forbiddened, reformed, corrected and punished.”

I’d like to add a couple facts that are probably not known by even one ordinary citizen out of a hundred:

FACT #1. None of the money in your bank account actually belongs to you. Changes in banking laws after the 2007 debacle have now characterized the money that you deposit in a savings or checking account as an “unsecured loan” that YOU have made to the bank.

That’s right…. you have loaned your money to the bank. But of course, THEY haven’t given YOU any sort of collateral or securitized the loan in any way. That’s what “unsecured” means.

In any sort of financial crisis, bank holiday, economic implosion, or whatever…. guess who is at the very bottom of the list of people who get paid back (little, if anything) by the now-failing bank?

Yep, you guessed it: unsecured creditors. Like you.

This didn’t happen by accident. An army of well-paid lobbyists — many of them lawyers– for the major banks guided this into becoming law; specifically so the banks themselves, and their shareholders, could survive while all of the average folks who trusted that “FDIC Insured” sticker would pay for it all. (The FDIC has far less than 1% of the funds necessary to insure all deposits. “FDIC Insured” is just window-dressing for the sheeple.)

FACT #2. “If you must use a bank keep only the absolute minimum necessary for transactions. Take the rest out in cash to use and save discreetly.”

Be careful how you do this. Once again, the average citizen is unaware of this: A withdrawal of $3000 or more in cash automatically generates a SIR (Suspicious Incident Report) which the government forces banks to submit to the authorities.

Supposedly this is to keep tabs on the usual boogeymen — drug dealers and terrorists — but really it’s to keep tabs on EVERYBODY. The government doesn’t like cash (for a myriad of reasons) and simply wanting to have your own money is regarded as adequate to put you on a Watch List.

It might be a good idea to have a couple different accounts; at least one should be at a credit union, rather than a bank. If you’re married, then Spouse should have a couple accounts at other financial institutions that are not the same as yours.

If things start to look unsettling — or even if you just want to get back some of your own money without Big Brother putting you on some kind of Watch List — then you and Spouse can (for example) pull 2,500 out of each of these four places, all in the same day, without generating any SIR reports.

That’s ten grand of your money back in your hands, every 24 hours, without setting off any alarms.

CAVEAT: This information is accurate to the best of my knowledge. Some of these data may have changed; and TPTB often do not publicize changes. Use your own judgment.

The 2007-8 crash demonstrated the establishment will never accept any meaningful correction. They simply changed the rules, changed the value of the money, made money worthless regards earnings and interest and printed as much as they needed to bail out the rest of the world. They thereby inflated the value of the new money until your old money had very little value. They stole the savings of the middle classes and they are still not done.

Having gotten away with it, we can plainly see they will never accept correction only the inevitable catastrophe they won’t be able to effect. This is no square house. This game is fixed and everyone knows it.

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